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Land -
Agreement – Lease –
Unconscionability - Termination
of - Renewal clause – Recovery
of possession - Damages for
trespass - Perpetual Injunction
- Breach of the terms of the
lease - Mesne profits -
Section 18 of the Conveyancing
Decree, (NRCD 175) - Whether or
not the agreement was
unconscionable - Whether the
Plaintiffs and others occupying
the disputed property could
properly be declared statutory
tenants - Section 1 subsection 2
(2) (c) of the Rent Act, 1963,
Act 220.
HEADNOTES
The
Plaintiffs/ Respondents/
Appellants hereinafter
(Plaintiffs) are the
beneficiaries and successors of
the estate of the late Kwaku
Mireku a Kwahu businessman. The
1st, 2nd, and 3rd Defendants/
Appellants/Respondents
(hereinafter Defendants) are the
children of the late Abraham
Narh Tetteh, the original owner
of Plot No. D 774/3 Okaishie,
Accra, (the subject matter in
dispute,) who died in 1941. In
November 1965, the late Kwaku
Mireku took a lease of the said
land for a term of 32 years from
Adjei Tetteh a son of the
original owner. In accordance
with the terms of the said lease
agreement, the late Kwaku
Mireku demolished existing
structures on the land and
constructed a three-storey
building with stores for his own
use which he named Mireku House;
and a two storey-house for the
use of the lessor. The definite
term of the lease was for 32
years without any
renewal
clause.the Defendants had
their solicitor give notice to
the Plaintiffs of the expiry of
the lease and their intention to
recover possession of the Mireku
House. The Plaintiffs by a
letter dated 26 November 1996
acknowledged receipt of the
letter and pleaded for a new
lease of 50 years which the
Defendants rejected. Thereafter,
the Plaintiffs on 7 August 1997
instituted an action before the
High Court Accra In their
statement of claim the
Plaintiffs averred that they
have had cordial relationship
with the defendants and also
created goodwill for their
business in the area. That in
1984/85 there was a fire
outbreak that destroyed a
substantial part of the
building. The building was not
only repaired and refurbished
but a fourth floor was added to
it to the knowledge of the
defendants Defendants in defence
claimed they “were never made
aware of any fire outbreak and
of any extension”, and that
there was a clear understanding
that the lessor would take over
the property at the expiration
of the lease. They therefore
counterclaimed The High Court
resolved both issues in favour
of the Defendants, and dismissed
the first and second reliefs
sought by the Plaintiffs The
Defendants being dissatisfied
appealed against the judgment to
the Court of Appeal. The Court
of Appeal dismissed the
cross-appeal and upheld the
appeal by the defendants and set
aside the orders of the trial
court
HELD
A lease
agreement is a contract for the
lease of land and thus the terms
of the contract has to be by
mutual agreement. Whereas some
covenants by the lessor/
transferor and the covenants by
the lessee/transferee are
implied by common law and
statute, the option for renewal
is not Accordingly the option
for renewal can only be
conferred on a tenant by express
mutual agreement of the parties
and ought to be an express term
in the lease agreement. We
affirm the decision of the Court
of Appeal that the absence of a
renewal clause did not render
the agreement unconscionable
We further agree with
the learned justices that the
order by the trial judge to the
Defendants to renew the lease
for the Plaintiffs was an
imposition. It is not the duty
of the Courts to make a new
contract for parties on terms
they have not mutually agreed
upon. We accordingly dismiss
this ground of appeal. For the
above reasons the appeal fails
and is accordingly dismissed.
The judgment of the Court of
Appeal is hereby affirmed.
STATUTES
REFERRED TO IN JUDGMENT
Conveyancing
Decree, (NRCD 175).
Rent Act,
1963, Act 220
CASES
REFERRED TO IN JUDGMENT
Fry vs. Lane
[1888] 40 Chan. Div. 312,
Attitsogbe
vs. CFC Construction Co. (WA)Ltd.
& Read [2005-2006] SCGLR858
Shahin vs.
Cofie [1994-95] 1GBR 398
Achoro v.
Akanfela [1996-97] SCGLR 209
Koglex Ltd.
(No.2) v. Field [2000] 175.
Addison v.
A/S Norway Cement Export Ltd.
[1973] 2 GLR 151
City and
Country Waste Ltd. vs. Accra
Metropolitan Assembly 2207-2008]
SCGLR 409
BOOKS
REFERRED TO IN JUDGMENT
Black’s Law
Dictionary 8th
Edition
DELIVERING
THE LEADING JUDGMENT
SOPHIA
ADINYIRA (MRS), J.S.C
COUNSEL
GEORGE AGBEKO
FOR THE APPELLANT
HON. J.
AYIKOI OTOO FOR THE
DEFENDANT/APPELLANTS/RESPONDENT.
JUDGMENT
SOPHIA
ADINYIRA (MRS), J.S.C:
Delivered the Judgment of the
court
FACTS
The
Plaintiffs/ Respondents/
Appellants hereinafter
(Plaintiffs) are the
beneficiaries and successors of
the estate of the late Kwaku
Mireku a Kwahu businessman. The
1st, 2nd, and 3rd Defendants/
Appellants/Respondents
(hereinafter Defendants) are the
children of the late Abraham
Narh Tetteh, the original owner
of Plot No. D 774/3 Okaishie,
Accra, (the subject matter in
dispute,) who died in 1941. In
November 1965,
the late
Kwaku Mireku took a lease of the
said land for a term of 32 years
from Adjei Tetteh a son of the
original owner. In accordance
with the terms of the said lease
agreement, the late Kwaku Mireku
demolished existing structures
on the land and constructed a
three-storey building with
stores for his own use which he
named Mireku House; and a two
storey-house for the use of the
lessor. The definite term of the
lease was for 32 years without
any renewal clause.
By a letter
dated 15 May 1996, the
Defendants had their solicitor
give notice to the Plaintiffs of
the expiry of the lease on 31
October 1997 and their intention
to recover possession of the
Mireku House by 1 November 1997.
The Plaintiffs by a letter dated
26 November 1996 acknowledged
receipt of the letter and
pleaded for a new lease of 50
years which the Defendants
rejected.
Thereafter,
the Plaintiffs on 7 August 1997
instituted an action before the
High Court Accra claiming the
following reliefs:
1.
“An order varying the terms of a
lease dated 2 October 1965
between Adjei Tetteh and Kwaku
Mireku on grounds of
unconscionability; or
2.
In the alternative, a
declaration that Plaintiffs are
statutory tenants
3.
Any further order(s) or relief(s)
as the Court may deem fit.”
In their
statement of claim the
Plaintiffs averred that they
have had cordial relationship
with the defendants and also
created goodwill for their
business in the area. That in
1984/85 there was a fire
outbreak that destroyed a
substantial part of the
building. The building was not
only repaired and refurbished
but a fourth floor was added to
it to the knowledge of the
defendants. The Plaintiffs
claimed per Paragraph 12 of
their statement of claim that:
“Paragraph
12: “The Plaintiffs aver that it
will be unconscionable to
terminate
the lease and seek relief
under
section 18 of the Conveyancing
Decree, (NRCD 175).
PARTICULARS
OF
UNCONSCIONABILITY
1.
The lease agreement did not
contain any covenant or term
against renewal and therefore
entitled the lessees to renewal.
2.
The Lessee built a 2 storey
building for the Lessor for his
own use free of rent which
building is now occupied by the
family of the Lessor and
strangers.
3.
The lease required the Lessee to
build a 3 storey building for
him to enjoy a term of 32 years
thus working into 10 years 8
months for each storey.
4.
The extension of the 3 storey
building into a 4 storey by the
Lessee to the knowledge of the
Lessor entitled it to a further
term of 10 years 8 months on the
basis of the 4 storey alone.”
The 1st,
2nd and 3rd
Defendants in defence claimed
they “were never made aware of
any fire outbreak and of any
extension”, and that there was a
clear understanding that the
lessor would take over the
property at the expiration of
the lease. They therefore
counterclaimed for the
following reliefs:
1.
An order for immediate recovery
of possession of
H/No.D774/3,Kimberly Avenue,
Accra, and structure known as
H/No. 1167/4 Kimberly Beach
Avenue, Accra.
2.
Damages for trespass
from 1 November 1997.
3.
Perpetual Injunction
restraining the Plaintiffs from
in any way dealing with the said
H/No.D774/3,Kimberly Avenue,
Accra, otherwise known as H/No.
1167/4 Kimberly Beach Avenue,
Accra.
The 4th
Defendant who is the
administrator of the estate of
the late Adjei Tetteh filed a
separate statement of defence.
He claimed that any repair or
refurbishment of the said
premises was an obligation on
the lessee under the lease
agreement. The extension of the
building to a four-storey
building was done without the
prior written or consent of the
defendants or the family and it
was therefore a
breach of
the terms of the lease. The
4th Defendant claimed
further that the Plaintiffs have
let out the 4th floor
of the building to tenants for
their sole benefit and can
therefore not use the extension
upon which to base their claim.
He also counterclaimed for
recovery of possession, damages
for trespass and
mesne
profits from 1/11/97 to the
date defendants recover
possession of the premises.
The issues
set down for determination at
the trial were several but the
High Court Judge after hearing
of evidence set down only two
issues arising for
determination. These were:
1.
Whether or not the agreement was
unconscionable
2.
Whether the Plaintiffs and
others occupying the disputed
property could properly be
declared statutory tenants.
The
High Court resolved both issues
in favour of the Defendants, and
dismissed the first and second
reliefs sought by the Plaintiffs.
He held that the lease agreement
between the lessor and the
lessee was not unconscionable
because it was prepared for the
parties by a lawyer and the
parties appended their
respective signatures to the
document indicating their
acceptance of the terms agreed
upon. The trial judge further
held that from the nature and
terms of the expired lease, even
though the Plaintiffs have
remained in possession of the
premises after the expiry of the
lease, they could not be
declared statutory tenants by
virtue of
Section 1 subsection 2 (2) (c)
of the Rent Act, 1963, Act 220.
The said section reads:
1.
“Application of the Act
(1)
Subject to subsection (2), this
Act applies to all premises.
(2)
This Act does not apply to
(c) a lease after the erection
of the new premises, where the
lease, whether entered into,
before, or after the date of
commencement of this Act was
entered into as a lease of land
on which there were premises but
the premises were demolished and
new premises erected within five
years after the grant of the
lease.”
On the third
relief the trial judge at page
218 of the record of said:
“The third
relief is stated as follows:
‘Any further order[s] or relief
as the Court may deem fit.’
This is not a specific relief.
The Plaintiffs are as it were,
throwing themselves upon the
Court to grant them any relief
as the justice of the case
required. Taking the whole
circumstances of the case into
consideration especially, the
fact that the Plaintiffs
predecessor in title put up two
buildings at his own expense,
one of which was given to the
lessor; the Plaintiffs repaired
the building when it was gutted
by fire and added another story
to the original three at their
expenses; the Defendant do not
need the premises for their own
personal use and are likely to
let out the premises to other
tenants; the goodwill built by
the Plaintiffs over the years
and the hardship that would be
caused the Plaintiffs if they
are asked to quit among
others...”
The trial
judge therefore ordered that the
Defendants should renew the
lease within three months of the
judgment at a recoverable rent
to be agreed by the parties or
failing that to be fixed by the
Rent Officer and all rent
arrears to be paid to the
defendants. He dismissed the
counterclaims of the Defendants
except the claim for mesne
profits equivalent to the rent
for the period 1November 1997 to
the date of the judgment.
The
Defendants being dissatisfied
appealed against the judgment to
the Court of Appeal
on the ground:
“The judge
erred when he ordered the
Defendants to renew the lease of
the premises when indeed there
is no renewal clause contained
in the leasehold document
governing the premises.”
The
Plaintiffs on the other hand
cross-appealed on the grounds
that:
1.
“The trial court erred in law
when it held that Exhibit ‘A’,
the lease agreement between the
lessor and the lessee was not
unconscionable because it was
prepared for the parties by a
lawyer and the parties appended
their respective signatures to
the document indicating their
acceptance of the terms agreed
upon.
2.
The trial Judge erred in his
finding that the agreement was
not unreasonable in any way
without taking into account the
totality of the circumstances of
the lease notwithstanding the
fact that the lease did not
provide an option of a renewal.”
The Court of
Appeal dismissed the
cross-appeal and upheld the
appeal by the defendants and set
aside the orders of the trial
court
and granted
the defendants their
counterclaim. Their lordships
were of the view that once the
trial judge held that the lease
agreement was not unconscionable
and the Plaintiffs were also not
statutory tenants, he erred in
ordering the Defendants to renew
the lease agreement. It is
against this judgment that the
Plaintiffs have lodged a further
appeal to this Court.
The grounds
of appeal filed by the
plaintiffs before this court
are:
1.
That the judgment is against the
weight of evidence.
2.
That the Court of Appeal erred
when it failed to give effect to
the mandatory provision of
section 18 of the Conveyancing
Decree 1973, NRCD 175 and
thereby misdirected itself on
the law aforesaid.
3.
That the judgment of the Court
of Appeal was delivered per
incuriam of section 18 of the
Conveyancing Decree 1973, NRCD
175.
4.
The Court of Appeal erred in law
when it failed to consider the
bargaining conduct of the
parties their relative
bargaining positions with
respect to the commercial
setting of the property in
dispute and also the Appellants
as lessees built a two-storey
apartment for the lessor from
their own resources which the
lessor has remodelled into shops
and rented out to tenants.”
Grounds 2, 3,
and 4
Grounds 2, 3,
and 4 were argued together by
counsel for the Plaintiffs in
his statement of case which
related to the issue as to
whether the lease agreement was
unconscionable. For purposes of
clarity and brevity we will
consider these grounds first.
Although in
grounds 2 and 3 of the appeal
Counsel complained that the
judgment of the Court of Appeal
was delivered per incuriam of
section 18 of the Conveyancing
Act, 1973, NRCD 175, he did not
mention the section in his
statement of case even once. We
find counsel’s criticisms rather
scandalous and frivolous and it
is an indication that the
Plaintiffs did not fully
appreciate the judgment. The
Court of Appeal did consider
section 18 of the Conveyancing
Decree of 1973 which we find
unnecessary as it was not
applicable to this case as the
leasehold agreement under
consideration was concluded in
1965. Nevertheless the said
section was more or less a
codification of the common law
and practice in existence then
and which both the trial and
appellate courts considered and
applied.
The learned
trial judge’s conclusion that
the lease agreement was not
unconscionable was endorsed by
the Court of Appeal. The learned
justices did avert their minds
to section 18 of the
Conveyancing Decree 1973, NRCD
175 as well as decided cases on
the issue unconscionability.
They referred to
Black’s
Law Dictionary 8th
Edition at page 1561 for
guidance on the definition of
the word unconscionable as
contained in section 18. The
dictionary described an
unconscionable act or
transaction as “showing no
regard for conscience,
affronting the sense of justice,
decency of reasonableness”.
Ayebi J.A.
who delivered the judgment of
the court referred to the old
English case of
Fry vs.
Lane [1888] 40 Chan. Div. 312,
and the Ghanaian cases of
Attitsogbe vs. CFC Construction
Co. (WA)Ltd. & Read [2005-2006]
SCGLR858 and Shahin vs. Cofie
[1994-95] 1GBR 398, where
the Supreme Court per
Amuah-Sakyi J.S.C. held that:
2. ‘’The
issue of unconscionability ought
to be determined by reference to
the circumstances prevailing at
the time the agreement was
entered into, not at any later
date; otherwise, few agreements
would escape censure.’’
After
exhaustively evaluating the
evidence and the law Ayebi J.A.
said:
“The lease
Exhibit A was granted to
Plaintiffs’ predecessor on
2/10/65. There is no evidence of
any procedural abuse on the part
of the lessor during the
transaction. There is no
evidence that the terms of the
lease are abusive of the need,
ignorance or the means of the
lessee, Mr. Mireku. The
complaint of the plaintiffs is
rather about the absence of a
renewal clause in the lease. The
Plaintiffs on the evidence did
not blame the lessor for the
absence of a renewal clause.
Indeed the
parties to the lease were
literate. The lease was prepared
for them by a lawyer and they
appended their signatures
thereby agreeing to the terms.
The first Plaintiff at page 63
of the record of proceedings
boasted that his father Mr.
Mireku was an astute businessman
who is well-known in the
business community in Accra. As
a Kwahu man, the business acumen
of Mr. Mireku as published by
the son cannot be doubted. From
the terms of the lease, Mr.
Mireku appeared to be a man of
substance financially. The
lessor rather appeared to be a
poor land owner. The lessee
agreed to and indeed built a
three storey building on the
land for himself and a two
storey building for his lessor
within the stipulated time frame
at his own expense. He also
agreed to pay the annual ground
rent on the property. Finally he
agreed to surrender the land
together with the buildings he
has put up for his own use to
the lessor at the end of the 32
years.
Until Mr.
Mireku died in 1983, he did
business in the three storey
building he was permitted by the
lease to put up for his own use.
No questions were raised about
the absence of a renewal clause
in the lease....The three storey
building put up by Mr. Mireku
for his own use now called
MIREKU HOUSE consists of shops
which he gave out to his
children and family members and
then tenants. As at 1965 when he
was granted the lease, it is my
view that Mr. Mireku found the
terms commercially reasonable.
He thus lived and worked with
the lease throughout. Indeed any
objective bystander in 1965 will
hold this arrangement under the
lease fair and reasonable.”
In effect
there is a concurrent finding by
the two lower courts that the
lease agreement was not
unconscionable. We find no basis
to reverse this decision based
on the facts which the High
Court and Court of Appeal have
founded their conclusions. See
the cases of
Achoro v.
Akanfela [1996-97] SCGLR 209 and
Koglex Ltd. (No.2) v. Field
[2000] 175.
A lease
agreement is a contract for the
lease of land and thus the terms
of the contract has to be by
mutual agreement. Whereas some
covenants by the lessor/
transferor and the covenants by
the lessee/transferee are
implied by common law and
statute, the option for renewal
is not.
Examples of such implied
covenants on the part of the
lessor/transferor are covenants
for right to convey, quiet
enjoyment, freedom from
encumbrances; and on the part of
the lessee/transferee, covenants
relating to payment of rent,
repair to adjoining premises,
alterations and additions
assignment or subletting,
nuisance and sub-lease. See also
sections 22 and 23 of the
Conveyancing Act.
Accordingly the option for
renewal can only be conferred on
a tenant by express mutual
agreement of the parties and
ought to be an express term in
the lease agreement.
We affirm the
decision of the Court of Appeal
that the absence of a renewal
clause in Exhibit A did not
render the agreement
unconscionable.
We find no
merit in grounds 2, 3, and 4 of
the appeal and they are hereby
dismissed.
Ground One
The remaining
ground of appeal to be
considered is whether the
judgement is against the weight
of evidence. Counsel for the
Plaintiffs urged upon this Court
that the trial judge in making
an order for the renewal of the
lease:
“...did not
seek to make a contract for the
parties but took into
consideration the events that
happened which was not within
the contemplation of the parties
at the time of the execution of
the said agreement and for which
the Plaintiffs/ Respondents/
Appellants adequately responded
by committing substantial
resources to same.”
Counsel for
the Plaintiffs concluded that:
“My Lords, it
is our humble submission that
the trial judge order which he
made after he had taken into
consideration all the
circumstances of this suit, was
in accord with the principles of
fair justice, fairness and good
conscience and it is our prayer
that the said order be
restored”.
The events or
the circumstances that Counsel
refers to are the refurbishment
of the house after fire has
destroyed part of it, the
addition of an extra storey to
three storey building, and the
goodwill that the Plaintiffs
have established in the area.
Counsel for
the Defendants in their
statement of case submitted that
these same grounds were
unsuccessfully canvassed at the
trial court to have Exhibit ‘A’
to be varied as unconscionable
but the trial judge refused.
Counsel argued that,
consequently there was no reason
for the trial judge to turn
about and order a renewal of the
lease. It was for that conduct
that the Court of Appeal
chastised the trial judge and
set aside the order for renewal.
We do not
find any merit in this ground of
appeal. The evidence that the
Plaintiffs are basically relying
on here are the facts that they
repaired the three
storey-building after the fire
disaster and added a fourth
floor to it. In respect of the
repairs we note that there was
an express covenant under the
lease agreement for the
plaintiffs as lessees to keep
the three storey-building in
repair by the Plaintiffs. There
was also a covenant by the
Plaintiffs to insure the house
against any damage, fire,
earthquake etc. and to use all
monies received by virtue of
such insurance in rebuilding or
rehabilitating the said building
to make up any deficit out of
their own money. We consider
these acts of the Plaintiffs as
fulfilling their tenancy
obligation under the lease
agreement. Consequently the
Plaintiffs could not stand on
these repairs to insist on a
renewal of the lease agreement.
The addition
of the fourth storey is clearly
an improvement on the building
but once again there was no
express term in the agreement
for improvement or extension and
compensation/re-imbursement for
such. Moreover the Defendants
denied granting any permission
to the Plaintiffs for the
extension. The Plaintiffs were
unable to discharge the onus on
them. There was evidence that
the Plaintiffs rented out the
fourth floor for commercial
purposes for a period of 13
years before the expiry of the
lease. We therefore do not see
any inequity here as the
Plaintiffs have economically
benefited from the addition to
the Mireku House.
Accordingly,
the trial judge erred by relying
on the refurbishment and
expansion of Mireku House to
order a renewal of the lease
which he has ruled to be
conscionable and cannot
therefore vary. The Plaintiffs
have merely repeated arguments
that did not succeed at the
appellate court. They have been
unable to demonstrate that the
appellate court’s rejection of
their submissions constituted
such an error to warrant, the
intervention by this Court.
We further
agree with the learned justices
that the order by the trial
judge to the Defendants to renew
the lease for the Plaintiffs was
an imposition. It is not the
duty of the Courts to make a new
contract for parties on terms
they have not mutually agreed
upon.
Addison v.
A/S Norway Cement Export Ltd.
[1973] 2 GLR 151; City and
Country Waste Ltd. vs. Accra
Metropolitan Assembly 2207-2008]
SCGLR 409.
We
accordingly dismiss this ground
of appeal.
For the above
reasons the appeal fails and is
accordingly dismissed. The
judgment of the Court of Appeal
is hereby affirmed.
[SGD] S.O.A. ADINYIRA
(MRS.)
[JUSTICE OF THE SUPREME COURT]
[SGD] S. A. B. AKUFFO
[JUSTICE OF THE
SUPREME COURT]
[SGD] ANIN YEBOAH
[JUSTICE OF THE
SUPREME COURT]
[SGD] P. BAFFOE- BONNIE
[JUSTICE OF THE SUPREME COURT]
[SGD] N. S. GBADEGBE
[JUSTICE
OF THE SUPREME COURT
COUNSEL
GEORGE AGBEKO
FOR THE APPELLANT
HON. J.
AYIKOI OTOO FOR THE
DEFENDANT/APPELLANTS/RESPONDENT.
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